Yeah. He's not a fan. Apparently I'm going to be Langranging up the wazoo all year just so I can learn yet another fantasy sci-fi story. Oh good.

And, even better, here'shis 2009 NYT article on how the economists "missed" the 2008-9 financial system ultracollapse and tanks-in-the-streets near-second-Great-Depression, which even made our textbook author Stephen Williamsongo all Hulk Smash.

Pretty impressive! I'm personally going to skip the "perfectly rational consumer" bit for myself, though, and just question whether or not any of the model presented in class this year makes sense in terms of the fact the US market is essentially oligopolies and monopsonies, not even remotely competitive markets.

China's markets are dominated by mom-and-pop traders who are prone to fits of fear, greed and even more fear, sometimes all within the space of an hour. So it's not unusual for stocks to be up 3 percent one minute, down 2 percent the next, and then finish the day up 4 percent. That'd actually be a pretty tame day by Shanghai's standard.

The authorities, though, have had enough of this kind of extreme volatility — at least on the way down — and have circuit breakers in place this past week. The way it works is that the market takes a 15-minute break if it's ever down 5 percent on the day, at which point trading resumes — unless stocks fall an additional 2 percent. Then the market closes for the day. What's the problem? Well, anytime stocks start getting close to that first level, say down 4 percent, people race to sell anything they might want to out of fear that they won't be able to if they wait a little longer. That, of course, sends stocks down to the 5 percent threshold, which then gives them 15 minutes to figure out how to sell everything else before the next circuit breaker.

In other words, the rush to beat the circuit breakers made the market more likely to hit them.

Well, if that's the problem, why not get rid of the circuit breakers?

FT Alphaville - China just got rid of the circuit breakers. (With an illustration of how bad Google Translate is at Chinese, and how pathetic the Financial Times is that they can't find a fluent speaker in their office to spend 5 minutes hand-translating this. Not as if China's an important country to the world of finance.) Well, now you've got rid of the circuit breakers, that's your problem fixed then, right?

Sinocism - the problem hasn't even remotely been fixed. Man, his tone has sure changed now that he's living in the beltway, instead of in Beijing around the corner from the lot where the execution vans get parked at night, eh?

Which notes that the ISM is as low as it was back in 1995, the last time the US Fed began a tightening cycle after a long recovery from a bust, with oil in a bear market. Oh, wait, apparently it doesn't: BofAML interprets this chart instead as proof we're about to fall into a recession. Because they want to prove they can be as fucking retarded as anyone else. And the upshot?

Fortune - all the best Putin-themed products you can buy right now. Vladimir Putin cologne, Vladimir Putin Apple watches, Vladimir Putin rings, Vladimir Putin calendars... if only Ron Paul hadn't been wiped out by the gold miners collapse he'd be able to afford all this Putinophilia!

This semester at school is going to be tough: we finally are studying from grown-up economics textbooks. So e.g. I'm apparently going to be learning to do Lagrange optimizations to develop a microfounded macro model, etc.

a proper, sustainable long-run solution would require a fix to the global savings-investment imbalance. That, in turn, might mean dramatic reforms around the world, much higher rates of immigration to rich countries with shrinking workforces, and heavy borrowing by safe-asset issuing governments.

A zero interest rate environment is a panacea, as long as governments borrow that 0% money to finance the next leg in worldwide growth. Everybody harps on about government capital investment (human and physical), but this guy brings up a good point: why not also invest in transporting ~50 million third-world peasants a year into the developed world? That's also got a positive economic rate of return, and will also create a better world. Zero interest rates are what you always wanted, paleoconservatives: now what are you going to do with them?

FT Aphidville - CNH sale bomb. CNH-CNY spreads aren't supposed to be a thing, but they're now becoming quite a big thing. I see this and I'm wondering if this is going to be another one of those "the market always wins" currency conflicts along the lines of Soros' breaking of the pound. It's not theoretically impossible for the yuan to get smashed: you just need enough speculative capital lined up against it to be certain of an eventual win.

Wednesday, January 6, 2016

Congratulations to that guy from Sweden who's now visited this blog 2000 times. Molodets!

Here's some news:

New Deal Demoncrat - watch out for corporate profits. He thinks corporate profits as share of GDP is indicative of a top, I guess. I say that rather, it's indicative of the new trend as the corporate kleptocracy has stolen an ever-larger share of income for themselves. In any case, I guess he doesn't like the S&P right now.

Monday, January 4, 2016

People are often spectacularly bad at forecasting the future. But they don’t have to be, says Philip Tetlock, a professor at the University of Pennsylvania who has spent decades studying how people make predictions. In a new book, “Superforecasting: The Art and Science of Prediction,” which he co-wrote with journalist Dan Gardner,

New book? Ha! Bet you didn't see that coming....

Tetlock argues that almost anyone can learn to peer into the future.

Earlier in his career, Tetlock conducted a famous 20-year study in which he had a group of experts make a total of around 28,000 predictions about politics, war, economics and other topics over a timeline of one to 10 years. After scoring all of their predictions against what actually happened, Tetlock’s takeaway was that experts were only about as effective at predicting the future as dart-throwing chimpanzees.

I'm honestly surprised. I thought chimpanzees mostly throw poop. Darts is something new from them. I'm worried. Soon it'll be spears, then muskets, then automatic rifles, next thing you know a dozen armed chimpanzees with neo-Nazi sympathies march into a public building in Oregon and demand the overthrow of the Kenyan Islamist usurper.

Oh well. Someone get these chimps credit cards so they can sign up for Doug Casey's newsblather. Maybe he can persuade them to buy some semidesert in Chile instead.

While experts on average didn’t make predictions that were much better than chance, there was a small subset of experts that were actually pretty good at making predictions, a group that Tetlock has come to call “superforecasters.”

[...]

After all this research, Tetlock concluded that the superforecasters aren’t necessarily geniuses, math whizzes or news junkies, though all are intelligent and aware. What separates them from everyone else are certain ways of thinking and reasoning that anyone of decent intelligence can learn, Tetlock says — if they’re willing to put in the work.

Then the article goes into detail about what you need to do to forecast correctly. Step one is (gasp) pull your head out of the echo chamber that is your fucking ass and look at some data.

Here's the unsurprising bit:

Another key to being a good forecaster is to try to keep your beliefs from clouding your perceptions. This is a fault that Tetlock and Gardner say is far too common among the talking heads on television and in the newspaper who make the most influential predictions in America, about things like whether the United States can defeat the Islamic State, which candidate will win the Iowa primary, or if the Fed will raise interest rates.

People want answers. As a result, the media gravitate toward those with clear, provocative and easy-to-understand ideas, and audiences tend to believe those who speak with confidence and certainty.

The problem is that those who speak with confidence and certainty and spin a clear narrative are actually less likely to make accurate predictions, say Tetlock and Dan Gardner. And the more famous the expert is, the worse he or she seems to be at forecasting the future. Tetlock’s original study — the one in which he concluded that experts were roughly as effective as chimpanzees — actually showed an inverse relationship between the fame of an expert and the accuracy of their predictions.

OK, so maybe it's a bad idea to give all the chimps with darts a subscription to Casey. Then again, bankrupting them economically may buy us some needed time before the chimp revolution.

Tim Duy - a look into 2016. No recession, no recession, no recession. At least if you look at the data. Especially interesting is that exports (and to a certain degree investment, which is probably also tied to exports) are the one drag on economic growth. So if you think the USD is done moving, and commodities have done collapsing, then you must be bullish the US economy, right?

Now, to be fair, some widely predicted consequences of Mr. Obama’s re-election — predicted by his opponents — didn’t happen. Gasoline prices didn’t soar. Stocks didn’t plunge. The economy didn’t collapse..., and the unemployment rate is a full point lower than the rate Mr. Romney promised to achieve by the end of 2016.

That's pretty darn impressive - not managing to outperform a Republican candidate's pie-in-the-sky promises, but rather K-dog still making fun of Romney (and thus also his lapdog Mankiw) three years after the election has passed. Sarcasm really is a dish best served cold!

WSJ China Realtime - China's stock market circuit breaker works. To be fair, this is the Chinese market. We should expect it to be silly. I mean, the Chinese still believe that mammal penises have magical healing properties. I wonder if they're still going to lift the six-month-old share-selling ban this Friday?

Whatever else I say about the health of the US economy, I gotta admit that is one big long ominous topping pattern right there.

I would say the August "omgfucksell" collapse is a negative for this chart, since it hasn't been recovered from, which means the market still awaits another one. And what it awaits it usually a-gets.

If I had faith in the intelligence of Wall Street, I would say this toppy chart is a searing indictment of the Fed's decision to raise rates with US output still far below trend and no wage inflation to be seen. Anyone with some Hicks and AD/AS behind them knows that you don't raise rates til Y is above Y-bar, and we're nowhere near that point, and we know because inflation is still way below 2%, and even the Fed knows there's utterly zero wage-push inflation going on anymore now that the working class has been beaten back down into the gutter, and didn't you all want zero interest rates anyway?

But I don't have faith in the intelligence of Wall Street. So either they're all selling US equities to buy Europe (boneheaded), or they're deleveraging (good for future equity market strength), or they're reallocating to money-market en masse (...actually that's about the most convincing explanation to me, but I haven't seen any data).

But if you don't know what the crackheads are doing, perhaps it's best to sit back and watch.

FXI:

Pretty freaky how the rebound from the August puke ended right at the 20-day Bollinger mean, eh? It's as if the entire market is using that mean line as a sell point.

USD ETF:

I'm waiting for the chattering class to realize that the USD hasn't actually done anything in the past year. OK sure, is that a cup and handle forming, which would mean a further jump of 20-30% in the USD is in the cards?

No. It's not a cup and handle forming because there's no reason for the USD to go on another 20% tear like it did in late 2014.

And all thru this fall, gold ex-USD still didn't break down below its support line. So gold only looks bad to Americans. Watch the gold-dollar correlation for warning of a possible gold upmove.

New Deal Demoncrat - weekly indicators. Real estate loans, M1 and M2, tax withholding, you know the drill. He thinks a commodity bottoming might be in the cards, which definitely would vaporize one honky excuse for selling the S&P.

In our opinion, in order to do the mass killing that these zombies are anticipated to conduct, they will need zombie mobiles and transports to get around. There is no way they can cover that much ground and do so much killing on foot. These vehicles will need to be powered by refined oil products, whereas the demand for gold and how to trade it under such a scenario is questionable.

1) The zombies turn out to be liberal zombies, as liberals, no matter what form, hate oil. This is a key risk to monitor. There is a good chance that the zombies will be liberal, as liberals will try to appease their attackers, instead of fight them tooth and nail. At this point they will have their brains devoured and quickly be on Team Zombie. This will not be fun for them, as Team Zombie works longer than 4 hours a day, has a performance-based culture, there are no extended holidays and you can never retire, let alone at 40 with full benefits. To add to the misery, Zombies are completely racist. In fact, they are all-consumed by this racism, as their sole mission is to devour humans as we know them.
2) These zombies are predominantly Eastern European, are female and/ or gay males. In this case, point A is remains largely relevant, and furthermore, jewelry demand will remain robust as looking fantastic will remain important. If they are going to kill, this group will want to do it with a certain degree of panache. They will appear much like the zombies in Michael Jackson's "Thriller" video. Tremendously mean, yet at the same time, flamboyantly dressed and incredibly gifted on the dance floor. In such an environment, gold demand should remain elevated.

So, if you are dying to be involved in the commodity complex, own oil over gold. There is tremendous relative value there and oil should outperform under various scenarios.

Zombies can't be liberal, guys, because they are against taxation and social programs. In fact, zombies are most definitely libertarian, since they're utterly fucking pig-ignorant of the tragedy of the commons that is their very existence, and expect the rest of the world to clean up their negative externalities.

So with exams done I've basically just been living my personal life, banking some sleep, and doing some reading for the upcoming semester, and that's why I haven't really been arsed to post what drivel has passed for news these past two weeks. If you've been paying attention then you already know that the market's gone nowhere in 2015, gold miners still suck, the Fed has begun raising rates, and Whitey has been on one of his crack-fueled market rages. So there's little for me to add.

As an aside, I've been thinking about splitting off the economics discussion to a separate blog, one that's perhaps more "presentable". We'll see. Frankly I'm still learning a load of undergrad econ (turns out that this semester's textbooks are actually written for adults), so I may as well keep all that econ crap here for at least another few months.

Speaking of which, my marks are good enough to earn me some wicked scholarships. Or at least they would have been wicked 20 years ago before academia's parasitic managerial class started jacking up tuition to pay for fancy buildings and inflated salaries: $2000 really would have helped a kid 20 years ago, but now it only pays for half a semester of classes taught by disinterested, underpaid sessionals.

Anyway, given the past 2 years' freaky winter GDP collapses due to statistical screwups, and the apparent expectation of earnings disappointments coming shortly, I doubt there'll be much action to have in the S&P for the next little bit.

As for gold miners, I'm already confident that the traditional January gold miner pop will, yet again, be misconstrued by the idiot goldbug brigade as the start of the new bull market. Until they get proven horrendously wrong yet again, of course. Because it doesn't matter if you're wrong 100 times in a row as long as you get 3 weeks to tout your temporary success at prediction #101.